The Royal Mail will be partially privatised as part of a range of measures to protect its long-term future, Lord Mandelson announced today.

The business secretary said the government had already had an expression of interest from the Dutch postal company TNT and that part-privatisation was necessary to ensure the continuation of the universal postal service.

He also said the government would take on a share of the Royal Mail's massive £7bn pension deficit.

Publishing Richard Hooper's report into the future of the Royal Mail, Mandelson said its conclusions made "sober reading" and ministers would be accepting its three key recommendations.

Hooper said the Royal Mail should form a "strategic minority partnership" with a private company, the government should take responsibility for reducing the pension deficit, and the service should be regulated by Ofcom, the communications regulator, not Postcomm, the postal services regulator.

Mandelson, who made his announcement in a statement in the House of Lords, said Hooper had concluded that "the status quo was untenable" and that, without reform, the universal postal service was under threat.

However, Mandelson insisted that the government was "firmly committed to the universal postal service". The Royal Mail is the only company delivering post to 28m homes and businesses in the country six days a week at the same price and it "helps bind us together as a country," he said.

Mandelson said Hooper had concluded that the Royal Mail faced a choice: it either had to "act now to turn things round", or accept the end of the universal postal service.

He told peers he would be responding in detail to the report at a later date. But he said he accepted Hooper's analysis and recommendations.

He insisted that the government would not abandon its election manifesto commitment to a "publicly-owned Royal Mail". But he insisted that allowing a private investor to take a minority stake would not contradict this.

Part-privatisation would allow the company to have access to "fresh investment" and to "new opportunities to grow in Europe and internationally". It would also be able to offer new services.

But a new partnership would not cover the post office network, Mandelson said. The government was providing £1.7bn up to 2011 to keep the network going and Mandelson said he had asked the Commons business committee to launch an inquiry into new services post offices could offer.

The Hooper report had identified five threats to the Royal Mail's future, Mandelson told peers.

First, the "revolution in communication technology" meant the postal service was delivering 5m fewer letters a year than it was two years ago. This was costing the company £500,000, which was five times as much as the company lost from competition from other providers.

Second, the Royal Mail was not as efficient as it should be. It had "less automisation and less efficiency than its western European counterparts". In other countries most letters were sorted into "walk order" by machine, but in the UK this sort of sorting was still always done by hand, he said.

Third, the pension fund deficit was "large, growing and volatile", Mandelson said. In addition to its annual contribution into the fund of £500m, the firm was also having to contribute an additional £280m to meet the cost of the growing deficit. And the deficit was set to rise "substantially" when the fund was revalued next year.

Fourth, labour relations were poor. Mandelson said there was a lack of trust between management and unions.

And, fifth, the firm also had a bad relationship with its regulator.

When Pat McFadden, the business minister, repeated Mandelson's statement in the Commons, several Labour MPs protested strongly about the plans, which they described as a breach of Labour's manifesto commitment to keep the Royal Mail in the public sector.

Speaking for the Tories, the shadow business secretary, Alan Duncan, said: "The government is trying to strike a deal to see them through the next election.

"They are trying to look like the saviour of Royal Mail but are doing so in flagrant breach of their election manifesto and also by raiding the pension fund to bail out government borrowing."

He said: "We broadly welcome ministers' intention to introduce a new commercial partner. It is a step in the right direction. But the details remain unclear."

Royal Mail chief executive Adam Crozier welcomed the report, which he "firmly believed" would help secure the future of the one-price-goes-anywhere universal service.

"Royal Mail also welcomes the recommendation by the panel that Royal Mail and Post Office Ltd should each be allowed to develop and thrive in their different marketplaces, with the ability to focus on serving their particular customers' needs.

"Our initial view is that the proposals, which have the full endorsement of the government, offer a strong and secure future for Royal Mail and Post Office Ltd, and the ability to invest in the best interests of their people and their customers. We will of course be examining the document in more detail to assess the full implications for the company."

"The views of the Hooper commission provide a clear framework for the UK postal sector going forward.

"Assuming the UK government implements these recommendations, I think that exploring a strategic partnership with Royal Mail makes a lot of sense for both our companies.

"The objective of the partnership would be to help develop Royal Mail into a modern, best-in-class postal operator that combines excellent mail service with solid and sustainable financial performance as part of a broader global network."